1. What would be the immediate impact (increase, decrease, or no effect) of the

Question

1. What would be the immediate impact (increase, decrease, or no effect) of the following transactions for Smith Corp? Ignore depreciation, interest expense and taxes.  Smith collects $30,000 from customers on accounts receivable. Collection on accounts receivable will increase cash and reduce accounts receivable by $30,000. True or False

2. Smith collects $30,000 from customers on accounts receivable. The current assets will increase. True or False

3. Smith pays off bank-notes payable for $10,000 by rolling short-term debt into long-term debt of 5-year bonds at the same interest rate. The payment of bank notes reduces current liabilities. True or False

4. Smith pays off bank-notes payable for $10,000 by rolling short-term debt into long-term debt of 5-year bonds at the same interest rate. The 5-year bonds decrease long-term liabilities. True or False

5. Smith pays off bank-notes payable for $10,000 by rolling short-term debt into long-term debt of 5-year bonds at the same interest rate. This will have no effect on ROE. True or False

6. Smith pays off bank-notes payable for $10,000 by rolling short-term debt into long-term debt of 5-year bonds at the same interest rate. The current ratio increases. True or False

7. Smith pays off bank-notes payable for $10,000 by rolling short-term debt into long-term debt of 5-year bonds at the same interest rate. The current ratio increases. True or False

8. Smith sells common stock for $30,000. The common stock offering will decrease shareholders

Explanation / Answer

1. True

2. False,

as current asset = cash+account receivable+inventory

3. true

4. false

5. True

6. true

7. true

8. false

9. true

10. false

11.false

12. true

13. true

14. true

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